Macquarie Bank today announced that 1H09 profit fell -43% from the previous year to 217 cents per share. However that headline number disguises the extent of the deterioration in MQG's business. In the review section of the Appendix 4D, the company had this to say:
Subsequent to balance date there has been a further significant deterioration in equity markets which has impacted the market prices of our co-investments in listed specialist funds. If the market prices at the date of this report had been used in the Group's assessment of recoverable amount rather than the 30 September 2008 prices then profit after tax would have been reduced by approximately $130 million.
So Assuming that the value of MQG's satellite funds are not going to revcover materially in the next 6 months, MQG's forecast profit of 483 cents a share is looking to be on shaky ground. For some reason the stock ralled more than 16% today, probably because whilst the result was bad, there were no nasty surprises.
I'll repeat something I said many times last year and early this year when I talked about US banks and the outlook for profits going forward. The easy money leverage up environment is gone, and since Macquarie has largely depended on that for growth they will have to get used to a lower earnings base for the next few years.